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Bed Bath & Beyond Inc BBBY

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Brick-and-Mortar Struggles Displayed in Bed Bath's Third Quarter; Shares Slightly Undervalued

Jaime M. Katz, CFA Senior Equity Analyst

Analyst Note

| Jaime M. Katz, CFA |

We plan to make only a minor adjustment to our $22 fair value estimate for no-moat Bed Bath & Beyond after digesting third-quarter results. Sales of $2.76 billion were modestly ahead of the $2.7 billion we expected, and EPS of $0.08 came in a penny better than our model, but total same-store sales of 2% fell short of our 5% projection. Physical stores continue to suffer from the broad spread of COVID-19, as indicated by a 17% drop in total store sales and a same-store sales decline of 15%. Conversely, e-commerce again accelerated, with digital sales rising 75%, bolstered by a 77% comp. A less sanguine outlook for the February-ending final quarter of fiscal 2020 was the likely impetus in the roughly 11% postreport share decline. Fourth-quarter sales are now expected to contract at a double-digit clip (much worse than our forecast 3% decline), while shipping constraints and higher freight costs could affect cost metrics.

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Company Profile

Business Description

Bed Bath & Beyond is a home furnishings retailer, operating around 1,391 stores in all 50 states, Puerto Rico, Canada, and Mexico. Stores carry an assortment of branded bed and bath accessories, kitchen textiles, and cooking supplies. In addition to 951 Bed Bath & Beyond stores, the company operates 129 Buy Buy Baby stores and 53 Harmon Face Values stores (health/beauty care). It recently divested online retailer, the One Kings Lane business and Christmas Tree Shops and That (gifts/housewares) and Linen Holdings. Its 258 Cost Plus World Market locations are set to be sold by the end of fiscal 2020.

650 Liberty Avenue
Union, NJ, 07083
T +1 908 688-0888
Sector Consumer Cyclical
Industry Specialty Retail
Most Recent Earnings Nov 30, 2020
Fiscal Year End Mar 2, 2020
Stock Type Distressed
Employees 55,000